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Trust Your Real Estate Attorney – You Need Title Insurance!

For many people, a home is one of the largest investments they’ll ever make. During the residential purchasing process, there are several steps buyers should take to ensure a smooth transaction and to protect their investment. One of the most important steps is the purchase of title insurance.

 

What is a Title?

Starting with the basics, what exactly is a title? In real estate, a title refers to the legal ownership and rights associated with a property. When you buy a property, you are acquiring the title to that piece of real estate, which includes the right to occupy, use, and sell the property.

 

What is Title Insurance?

Title insurance protects you from loss if problems with your title come to light down the road. Before you purchased your home, it may have changed hands many times. The land on which it stands could have been bought and sold even more times. Sometimes records get lost, individuals forge transfer documents, or fail to pay taxes or other liens.

 

Although these outstanding issues should be uncovered before closing during a title search, that’s not always the case. If an issue arises, title insurance can help cover the costs of defending your ownership of the home. Title Insurance pays for the legal costs of defending against any lawsuit challenging your title and will either clear up the title issue or pay for your lost investment if you lose the lawsuit. 

 

Lender’s Policy vs. Owner’s Policy

Lenders go to great lengths to minimize their risk when lending you money to buy your home – they check your credit, proof of income, and ensure the quality of the title to the property. As part of the closing process, they will require purchase of a lender’s title insurance policy, which protects them if there are unknown title defects down the road. This policy does NOT protect your interest as the homeowner. To protect yourself, you must also purchase an owner’s policy.

 

Common Title Issues

Homeowners are often skeptical that title insurance is necessary and believe that loss of a title is rare. In reality, there are lots of hidden risks that can lead to title litigation down the road. A few common risks include:

* False impersonation of the true owner.

* Forged deeds, releases, or wills.

* Undisclosed or missing heirs.

* Instruments executed under invalid or expired power of attorney.

* Mistakes in recording legal documents.

* Misinterpretations of wills.

* Deeds by one of unsound mind or legal disability.

* Deeds by allegedly single owner, but actually married.

* Liens for unpaid estates, inheritance, income, or gift taxes.

* Fraud.

Most title disputes don’t come from bad actors trying to steal your home, but rather confusion or poor record keeping by previous owners.

 

Reasons You Need Title Insurance

While title insurance can seem like just another expense when purchasing a home, without it, you may end up with significant expenses down the road if a title dispute does arise.

 

Legal Fees to Fight a Title Dispute

When there is a title dispute, the parties involved will often have to go to court to resolve the issue. When you have title insurance, the insurance company will pay for legal fees. Without title insurance, you will be responsible for these legal fees yourself.

 

Liability for Liens

When a homeowner has unpaid debts, a lender may put a lien against the home. The most common types of liens are mortgage liens and tax liens. Whether or not the person who incurred the debt associated with the lien still lives in the home, the lender will still want their money. If a lien against the home is uncovered, title insurance will generally cover the cost. Without title insurance, you may be liable for the lien yourself and the legal fees associated with fighting it in court.

 

A Real Estate Attorney Can Help with Your Home Purchase

When investing in a home, the last thing you need is loose ends. From title insurance to negotiating the contract, a real estate attorney can help ensure nothing falls through the cracks, giving you peace of mind that your investment is safe.